Producers urged to cash in on wheat rally

While June is usually the month for its seasonal lows, the wheat market is seeing near record contract highs this week.

Market analysts are urging producers to take advantage of this high price action.

"This is very atypical behavior for the U.S. wheat market," said Bill Tierney, John Stewart & Associates. "For the end-user, this doesn't bode well for future wheat prices, the producer sees opportunity."

The main reason for a trend of higher wheat prices is the expected decline in winter wheat crop estimates, Tierney said. Lower area is expected for the soft red winter wheat crop, and further damage to the hard red winter wheat crop from the Easter freeze.

In addition, Tierney said the market sees a lower world supply of wheat.

The biggest trouble spots still in need of rain are the south and east Ukraine and southwest Russia.

Australia and Argentina are in their winter wheat planting season. Eastern Australia is suffering from a lack of rainfall.

"That would further tighten the record stocks-to-use low that we are already expecting this year," Tierney said.

Meanwhile, Ukraine announced its government wants to restrict wheat exports to boost domestic supply.

WHEAT FIGHTING FOR THE LEAD

It's been tough to figure out if corn is leading the wheat market, or if the wheat market is leading corn, Tierney said.

"I think if wheat takes off, it will be hard for the corn market to ignore it," Tierney said. "At least until the June 11 acreage report."

Even if the USDA's June report leaves the corn balance sheet unchanged a $0.50 jump in the wheat market could mean a $0.20 boost for corn, Tierney said.

Noel Blue, a CBOT floor trader and analyst, said in a daily newsletter that there are already signs the two markets are working in tandem.

"Our corn and wheat prices are still firm despite the rains. I see upside targets, 4.00 corn and 5.50 wheat for the week," Blue said.

WHEAT MARKETING URGED

On Tuesday, John Roach, Roach Ag Marketing, Ltd, urged producers to price a portion of their crop in all three classes of wheat.

"I believe this wheat sell signal will point out the top of the pre-harvest market rally," Roach said. "As harvest accelerates, I expect wheat prices to come under pressure."

Roach added, "Now is the time to make sales of wheat that you are not able to store. It is also time to buy puts on the wheat you plan on storing."

While June is usually the month for its seasonal lows, the wheat market is seeing near record contract highs this week.